HSBC set a new record low rate today but a top mortgage adviser doesn’t expect more rate drops to follow.

A real estate boss predicts a strong spring and summer for real estate, despite tighter LVR restrictions and banks not passing on the cash rate cut in full.

Century 21 New Zealand national manager, Geoff Barnett expects low interest rates to fuel more people into the market, saying the loan-to-value restrictions taking effect in October will make little difference to demand in the real estate market.

Despite the banks not passing the benefit of full 0.25% cash rate cut to mortgage holders, Barnett says the low interest rates will not deter buyers.

“It’s going to be a strong spring for real estate regardless fuelled by already low interest rates which are now arguably close to, if not, rock-bottom,” says Barnett.

“People should not wait and wonder whether the Reserve Bank will cut the OCR again in the coming months. There’s no guarantee that will happen nor is there any guarantee the banks will pass on such cuts, as we have seen across the Tasman where banks only passed on a small portion of their latest rate cut.

“Home ownership remains a dream for many people, and falling interest rates always help make it a reality for more people.

“As well as pretty tough deposit rules these days, banks are really scrutinising people’s ability to service mortgage debt long-term. The Reserve Bank’s latest cut can only help get more young couples and singles over the ‘mortgage approval’ line,” he said.

After Australia’s Reserve Bank also cut the cash rate recently to 1.5%, all its major banks retained at least one-third of the cut and overall, lenders only passed on an average of 13bps to customers, according to CANSTAR data.

The Australian Prime Minister Malcolm Turnbull recently announced that the major banks will face regular scrutiny from a parliamentary panel in response to growing public disquiet about how the lenders’ set their interest rates.

Canstar NZ General Manager Jose George didn’t expect New Zealand banks to pass on the cut, particularly after seeing what unfolded after Australia’s cash rate cut.

The banks also increased rates for some term deposits after the cash rate announcement.

“Clearly they want to encourage saving in the market and ensure that they manage to get possibly a larger chunk of their funding from the domestic market itself,” George told NZ Adviser.

“From a bank’s point of view, they’ve very clearly shown their hand in terms of trying to balance shareholder expectations and in terms of the opportunity for them to position it as being reasonable and responsible lenders in the market.”

George says the likelihood of a further cash rate cut in December is very high since the primary focus for this rate cut was to soften the New Zealand dollar and it didn’t have the intended effect.